DULUTH, Ga. -

A day after Sonic Automotive discussed its plans to roll out a network of stores solely dedicated to selling pre-owned vehicles, investment analysts wanted to know if Asbury Automotive Group is constructing a similar strategy.

While Asbury’s leadership team on Tuesday discussed many segments of its used-vehicle operation, president and chief executive officer Craig Monaghan stopped far short of announcing the same kinds of objectives his contemporaries from Sonic did.

“I guess we look at this way. We’ve demonstrated that we’ve got some pretty good used car people in this company. You see our results,” Monaghan said in reply to the question from Ravi Shanker of Morgan Stanley.

“We also spend a lot of time looking at what our competitors do and what the opportunities are in the market,” Monaghan continued. “Obviously the used-car business is a very large opportunity. And while we’re taking advantage of part of it, we recognize that it’s a 40- to 45-million unit business out there and maybe there’s an opportunity to do more.

“We do explore it. We’re exploring it today. We’ve got an obligation given our availability of capital and expertise to explore that market. But at this point, we really don’t have anything meaningful to say. It’s something we’re taking a look at,” Monaghan went on to say.

Auto Remarketing published reports here and here about Sonic’s pre-owned store plan that the company revealed on Monday. Those developments coupled with how Asbury’s used division performance in the third quarter — details that are available here — prompted Wall Street observers to push for more commentary about this retail segment.

A line of Asbury’s Q3 report particularly drew attention. On a same-store basis, Asbury moved 3,636 more used units in the third quarter compared to the same period a year ago.

Asbury executive vice president and chief operating officer Michael Kearney indicated a number of factors “have really come to fruition” for group dealers to be able to turn that much more used metal in three months.

“We put a lot more capital into the inventory itself. We carry a lot more product. And that spectrum of product, we’ve broadened it dramatically,” Kearney said.

“We’ve expanded reconditioning hours whether it’s going into evenings or over the weekend. We’re getting our reconditioning work done a lot faster,” he continued.

“We’ve expanded our used-car buying teams,” Kearney added. “We are sending a lot less product to the auctions. We’re keeping them at the individual stores or we’re transporting them to other stores so we’re saving a lot of fees. It’s just a quicker availability of product. It’s a just a continuation of making trade acquisitions more quickly and effectively at the dealership level.”

Kearney admitted that it will be a challenge for Asbury to continue retail sales growth of 20 percent or more, but “we’ll keep refining our processes.”

Per Vehicle Gross Profit Dips

While the retail volume soared, Asbury reported that gross profit per used vehicle on a same-store basis softened by 6 percent in the third quarter. The exact figure dropped from $1,818 to $1,713.

“If you listen to the people I talk to in our department, they’ll tell you it better not get any lower than this,” Kearney said. “I think this is something we’re going to stabilize internally. There may be some ups and downs to it.

“We’re putting programs in place to return to a little bit of a higher number than what we’re seeing today, but we don’t want to take away from the volume push either,” he went on to say.

F&I Compliance and Lender Letters

Dialogue has circulated through the industry about lenders possibly sending letters to dealerships to ensure F&I managers remain in compliance and do not discriminate as guidance from the Consumer Financial Protection Bureau articulated earlier this year.

According to Monaghan, Asbury has seen “a few” letters from banks, which fall under direction regulatory authority of the CFPB while dealers do not.

“But broadly speaking, we continue to do business very much along the lines of how we’ve done in the past,” he said. “We’ve always been very careful and conscious about that piece of the business. A big part of our audit program is geared toward our F&I offices to make sure we’re in compliance with the law and treating our customers fairly.

“Where this goes from now, I think we’re very much in a wait and see and we really don’t have a lot of clarity of what might happen next,” Monaghan continued.

Nick Zulovich can be reached at nzulovich@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.